The luxury segment has been the unexpected surprise of 2020. Despite a short dip in April and May, the market bounced back. The median price of luxury single-family homes* has increased by 4.8% since January, and sales volume has doubled since May. Major life changes due to the pandemic are thought to be responsible for a rise in demand for larger single-family homes in locations that can offer more space and greater freedom. This migration of wealth has led to new demographics that are shaping the luxury real estate landscape this year.
For the just-released “A Look at Wealth: New Affluent Trailblazers” (ALAW), the Coldwell Banker Global Luxury® program examines these trends more closely. In a first for us, we compiled analyses by Coldwell Banker Global Luxury Property Specialists and layered in real estate data from The Institute for Luxury Home Marketing, with wealth insights from WealthEngine and Wealth-X, to develop a picture of where wealth is moving in 2020. Here are five highlights from the ALAW report:
1. Intangibles are the new luxuries
Intangibles such as family, health and safety have become higher priorities for the affluent this year, while finding a home that better aligns with these priorities also grew in importance.
2. Changing lifestyles spark relocations
The pandemic has sparked major life disruptions for individuals. More of them are teleworking than ever before. They may have children who are distance learning. Some may have decided to retire earlier. With reduced travel schedules and fewer businesses open, they’ve changed their spending habits. In turn, they are looking at new locations and purchasing homes that better accommodate the current needs of their family. In high demand are properties that offer proximity to nature, security and safety, and amenities like pools, home gyms, flex spaces and rec rooms. Financial factors have also motivated some to look at communities with friendlier tax bases or lower costs of living.
3. Real estate’s big role
Luxury real estate professionals find themselves in the center of these lifestyle changes, underscoring the value agents bring to the table now more than ever before. Their local knowledge and connections are intangible luxuries in their own right — especially for clients who depend on their guidance and expertise to make key life decisions for their families. Agents who responded proactively to clients’ shifting needs, quickly adopted new procedures for completing real estate transactions safely, and pivoted to virtual technologies have already proven their worth by saving their clients time, money and anxiety.
4. New demographics
There is a migration of wealth away from major cities underway, creating new affluent demographics. We call these folks “trailblazers” because they are finding new paths for their lives in uncharted territory and turning away from metropolitan centers to relocate to small-town hidden gems, suburbs and popular second-home destinations. In the ALAW report, we identify three types of trailblazers: explorers, new suburbanites and resorters.
Explorers are moving to “hidden gem” locations — like exurbs, far-away communities and tiny towns — where their dollar carries them further. Explorers tend to be younger, more active and have a lower net worth, between $1 million and $5 million.
New suburbanites are leading a revival of the suburbs, as they look for more space, property amenities and good schools. Although some can be younger, we treat them in the report as slightly older than explorers, with school-aged children and net worth falling between $5 million and $10 million.
Finally, resorters are those flocking to their favorite vacation spots. They might be either permanently relocating to these areas or temporarily converting seasonal homes into primary residences. They are often in a higher wealth bracket — $10 million and over.
5. Decentralization of wealth
If wealth is leaving the cities, where is it going? For example, a lot of explorers appear to be concentrated in the South or sunbelt states. New suburbanites are still located near big metropolitan areas, just not in the heart of the city. Resorters can be found all over the map. Of course, there is a lot we have yet to learn. Will some trailblazers return to their metropolitan homes after the pandemic is over?
No matter what happens, rest assured that the Coldwell Banker Global Luxury team will be tracking these trends closely. Check back with us in 2021 when we release “The Report,” our annual global real estate outlook.
*Luxury is defined as the top 10% of closed sales in each market.